Environment ministry overhauls renewable energy system with competitive bidding

The Ministry of Climate, Energy and Environment said it has promulgated a revised law that will completely overhaul South Korea's renewable energy distribution system by shifting to a competitive bidding model. The Amendment to the Act on the Promotion of the Development, Utilization and Diffusion of New and Renewable Energy takes effect on Jan. 1, 2027, replacing the existing supply obligation framework with a unified contract market based on government auctions.

Under the new regime, operators of new renewable energy facilities will compete to win bids within price ceilings set by the state, after which they will sign long-term fixed-price power purchase agreements with Korea Electric Power Corp. The structure aims to guarantee stable revenues for developers, improving bankability and reducing financing costs.

The ministry noted that the current system, introduced in 2012, helped expand renewable capacity but suffered from revenue uncertainty due to volatile certificate prices and complex trading structures.

Existing renewable energy certificates will continue to be issued for up to 20 years under a phased sunset approach, while the spot market for certificates will operate with a three-year grace period until Dec. 31, 2029. Separate contract markets will also be established for small-scale facilities to ensure a stable transition.

Public institutions and private power generators will be designated as mandatory suppliers with specific capacity targets. The ministry conducted 82 consultations with stakeholders including utilities, solar and wind industry groups, and environmental organizations since announcing the initial reform plans in 2024.

A public hearing is scheduled for Sept. 30 to gather further feedback on the detailed implementation rules currently open for legislative notice.

"We plan to finalize the subordinate statutes after thorough deliberation through public hearings given that this is a fundamental reform of the core system governing renewable energy distribution," Lee Kyung-soo, the ministry's renewable energy policy officer, said. He added that the changes will open an era of major transition by stabilizing business profits, systematically expanding supply and driving down prices.